Bought the car 3 weeks ago drove back from PA with this weird noise, I thought it was the heater core gurgling. the noise bothered me enough to take to a volvo tech (not dealer) I took him for a quick ride and he says, yep exactly what I thought it might be you hear the noise under load that's your transfer case its gone/going bad. His remedy pull it out make it a 2wd xc (not paying the bigger cost to retain the AWD functionality). So my questions are these has anyone else had this done to their car? What type of fuel mileage did you get once done? Any bad things come from doing this?

I've heard of people doing this but don't expect any benefits (ie to mileage). On the down side you'll hurt the resale value of the car. I'd start by looking for the availability of a used replacement part via car-parts.com - at least that way you get an idea of what a used part will cost. Seems if you're going to the effort of pulling the old unit out and stubbing the axles etc, you might as well put in a replacement.

My carrier bearing went bad, I took the driveshaft out. Runs fine. Gets about 2 mpg better now. Volvo wants $1000 for a shaft. Bearing can't be replaced without cutting it apart. I have a bevel gear from an 02, don't know if it is interchangeable (maybe someone on here does). I'll take $300.

I did a bunch of research trying to see cost of a transfer case to just swap it out with a new, recon, or working used but cost was too much and just went through with taking out the transfer case. Had the work done at the beginning of September. After having this done I have not seen a major increase in fuel mileage maybe 1 or 2 mpg.